Sri Lanka rupee hits fresh low; ends steady

COLOMBO, Sept 12 (Reuters) - The Sri Lankan rupee
hit a fresh low on Wednesday before ending steady as late dollar
sales by banks outpaced demand for the greenback from importers
early in the day.

However, the unit was still under downward pressure due to
global strengthening of the U.S. currency, traders said.

The dollar was largely unchanged on Wednesday as markets
remained cautious over the likelihood of an escalation in the
trade conflict between the United States and China in the
backdrop of growing weakness in the renminbi, but an index for
emerging-market currencies was near a 16-month
low hit the day before.

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The Sri Lankan rupee touched a fresh low of 162.70 per
dollar on Wednesday, surpassing its previous low of 162.65 hit
on Thursday, when it hit a record low for the 13th straight
session.

Junior finance minister Eran Wickremaratne told Reuters last
week that the government would leave it to market forces to
decide the level of the rupee.

But the Central Bank on Thursday cut the net open positions
of the banks to increase dollar liquidity forcing commercial
banks to sell dollars to ease the pressure on the currency.

The local currency ended at 162.35/45 per dollar, unchanged
from Tuesday's close.

Currency dealers have declined to speak to the media since
Tuesday citing central bank instructions.

Central Bank Governor Indrajit Coomaraswamy, who is out of
the country, late on Tuesday said he was unaware of such a move.

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The currency has weakened 0.6 percent so far this month
after a 1.2 percent drop last month, and has declined 5.9
percent so far this year. It will be under depreciation pressure
due to year-end seasonal importer dollar demand, dealers added.

The currency is also hurt by weakness in the Indian rupee
. India is Sri Lanka's biggest trading partner and the
Indian rupee, which also hit a record low on Wednesday, has been
one of the worst performers in Asia this year.